The US has apparently lost another ruling in the WTO. This one was against US agricultural subsidies in the cotton industry, in a case levied by Brazil. Brazil had argued that US cotton subsidies were excessive, and thus violated WTO rules. In a preliminary ruling, the WTO agreed.

There are a couple of points to take notice of here. First, if the WTO finds that the US’s cotton subsidies contravene WTO rules, then there may be broader implications for other types of US agricultural subsidies. Those subsidies are substantial, and form a major sticking point in numerous ongoing trade negotiations, not least of which is the Doha round of WTO negotiations.

Second, if this case establishes a precedent of any sort, other countries could be next in the sights of the developing world. Specifically Japan, Korea, and the EU are among the world’s biggest agricultural subsidizers, and they all must be watching this case closely.

Finally, note that this is a good example of how economic integration necessarily involves some loss of sovereignty. The Bush administration argued that the cotton subsidies were purely domestic in nature (and it’s true that they do not explicitly have anything to do with trade), and therefore are exempt from WTO oversight. But of course, despite the fact that the subsidies were not specifically enacted to have any impact on international trade, all production subsidies have the effect of distorting international trade. So according to WTO rules, Brazil did indeed have every right to complain about the US’s subsidies. But the tension between the right to make domestic policies and their possible conflict with international agreements will only continue to grow, undoubtedly making many people unhappy.

The WTO’s final ruling won’t be out for another 6 weeks. But personally, I think it would be great if the WTO forced the US to reduce its agricultural subsidies, since (thanks largely to the Bush administration’s craven dependence on campaign donations from agribusiness) American politicians haven’t been able to do it by themselves. The WTO could be providing help for all of us who aren’t cotton growers in the US – which was exactly what it was intended to do.